The SEC’s examination priorities for 2013 cover a range of issues at financial institutions, including broker/dealers, clearing agencies, exchanges, self-regulatory organizations, investment companies, hedge funds, private equity funds, and transfer agents.
Publishing the priorities is intended to promote compliance and communicate with investors and registrants about areas that the SEC perceives to have heightened risk, said Carlo V. di Florio, director of the SEC’s Office of Compliance Inspections and Examinations, which is responsible for the national examination program.
“Our examination program constantly seeks new ways to share our perspectives on key risks and regulatory issues so that registrants’ senior management, compliance and risk managers, among others, can take effective action,” di Florio said. “This document, as well as our Risk Alerts and other public statements, are windows through which we can increase transparency, strengthen compliance, and inform the public and the financial services industry about key risks that we are monitoring and examining.”
Issues that span the entire market as well as ones that relate specifically to particular business models and organizations are addressed. Market-wide priorities include fraud detection and prevention, corporate governance, enterprise risk management, conflicts of interest, and technology controls.
Priorities in each area include:
- Investment advisers and investment companies: Presence exams for newly registered private fund advisers, and payments by advisers and funds to entities that distribute mutual funds;
- Broker/dealers: Sales practices and fraud, and compliance with the new market access rule;
- Market oversight: Risk-based examinations of securities exchanges and FINRA, and order-type assessment; and
- Clearing and settlement: For transfer agent exams, timely turnaround of items and transfers, accurate recordkeeping, and safeguarding of assets. For clearing agencies designated as systemically important, conduct annual examinations as required by the Dodd-Frank Act.
The priority list is not exhaustive and priorities may be adjusted throughout the year in light of ongoing risk assessment activities.
Senior exam staff, management from the SEC’s 12 regional offices, and other SEC divisions and offices selected the examination priorities for 2013 in consultation with each of the commissioners, based upon information and risk analytics, including:
- Tips, complaints and referrals,
including from whistleblowers, customers and investors;
- Information reported by registrants
in required filings with the Commission;
- Information gathered through
examinations conducted by the SEC and other regulators;
- Communications with other U.S. and
international regulators and agencies;
- Industry and media publications;
- Data maintained in third-party databases; and
- Interactions with registrants, industry groups, and service providers (outside of examinations).